Shares of Charlotte Russe Holding Inc. dropped 20.3 percent Monday after the San Diego-based specialty store group named Leonard Mogil, 62, a board member and former Phillips-Van Heusen Corp. executive, as interim chief executive officer. He succeeds Mark Hoffman, 59, who retired.
The company also reported that third-quarter earnings fell to 31 cents a diluted share from 40 cents in the year-ago period. The result for the 2008 quarter fell 1 cent short of analysts’ consensus estimate. Sales rose 7.2 percent to $193.2 million from $180.3 million but were down 6.5 percent on a comparable-store basis. Full quarterly financial results will be released Wednesday.
Charlotte Russe said it expected “downward pressure on comparable-store sales and earnings per share for the fourth quarter of 2008.” The company operated 469 stores in 45 states and Puerto Rico as of June 28.
Shares of the firm fell $3.43 to $13.46 Monday. Over the last year, the issue has traded as high as $24.21 and as low as $12.27.
FBR Capital Markets analyst Adrienne Tennant downgraded the retailer’s stock to “market perform” from “outperform,” given, among other items, the negative comp trend and ongoing macroeconomic factors related to high exposure to the weakened California and Florida markets, which make up about 24 percent of the retailer’s store base.
These negative trends could outweigh any boost the stock might have seen from a change in the corner office.
“While we believe that management change can often be a catalyst for shares, we believe that the search will take some time and that business will continue to be sluggish,” said Tennant. “Investors in this environment will tend to avoid names with negative comps, margin contraction and ongoing earnings risk.”
Jennifer Salopek, non-executive chairman of the company, said Mogil “has extensive retail and operation experience and the board is confident he will lead the company effectively” during its search for a permanent ceo. Mogil joined the specialty retailer’s board in 2001, the same year he retired from PVH as group executive vice president.
Concurrently, the company disclosed in a Form 8-K, filed with the Securities and Exchange Commission, details of a new severance agreement with Hoffman that differed from those in his employment contract.
The severance agreement, which was reached on Sunday, gives Hoffman his current salary of $735,000 for one year, as well as a lump sum payment of $186,875 and professional fees of up to $18,000 related to the agreement.
Hoffman also agreed not to buy shares of the company or to offer to take part in any effort to change control of the company for a period of one year, conditions that were not in his previous employment agreement, according to SEC documents.
Hoffman became ceo in 2003 and joined the company as senior executive vice president in 2001. Prior to joining Charlotte Russe he was chief operating officer at Pacific Sunwear of California Inc., and earlier in his career put in stints at Claire’s Stores Inc. and AnnTaylor Stores Corp.
Other retail stocks came under milder pressure Monday as the Standard & Poor’s Retail Index declined 1.8 percent versus a 0.3 percent drop in the Dow Jones Industrial Average. The Nasdaq slumped 0.1 percent, while the S&P 500 was down less than that.
Among the larger retail decliners were Zumiez Inc., down 4.9 percent to $13.62; Nordstrom Inc., down 4.3 percent to $28.75; Stein Mart Inc., down 3.6 percent to $4.02; AnnTaylor Stores Corp., down 3.5 percent to $22.99; Kohl’s Corp., down 3.3 percent to $41.54; J.C. Penney Co. Inc., down 3 percent to $30.77, and Target Corp., down 2.6 percent to $45.66. On positive notes, Eddie Bauer Holdings Inc. staged a 6.6 percent rally to $4.68 and Hot Topic Inc. was up 5.1 percent to $6.56.
Among vendors, Blue Holdings Inc. was down 5.3 percent to 36 cents, while Joe’s Jeans Inc. rose 7.3 percent to $1.61 and Tarrant Apparel Group was up 5.2 percent to 61 cents.�